When 2 is Better Than 5

Before we get too excited over TMSC’s 5nm chip foundry in Arizona — which, keep in mind, is only on the drawing board at this point — we are reminded the chip maker is working on a 2nm factory in Taiwan.

In fact, it could have 2 and 3nm processes online abroad before it even breaks ground in America.

The US needs to get in gear if it wants to be a leader in wafer production.

Reshoring, with a Catch

A trio of recent posts on manufacturing reshoring — or not — caught my eye.

It’s not happening. Writing in Forbes, Workbench chief executive Prince Ghosh points out that the US lacks the human capacity to fully actionize a return of mass production: “US manufacturing still suffers from problems of labor skills and wage costs. Tariffs have succeeded in lowering global dependency on Chinese manufacturing, but they have failed in driving manufacturing back to the US.” He has a point: It took China 20 years to build up the workforce needed to become the World’s Factory, and that’s even with a roughly 800 million or more citizen advantage over every nation but India.

And there’s no assumption investment in the US will go toward the truly leading edge technologies. To wit: If TMSC builds a 5nm semiconductor wafer fab plant in Arizona, as promised, it will still be behind the state-of-the-art 3nm node process expected to be available in 2022.

It’s happening. A more optimistic view comes from Nick Stonnington, a Forbes Councils Member,* says the US “has the potential to be one of the few countries in the world that is essentially self-contained from a manufacturing standpoint.” 

“Reshoring US manufacturing,” he adds, “would not only save enormous transportation costs; it would tie up less capital for less time. When you manufacture your product 5,000 miles away, you must spend extra time specializing your process to each market. In contrast, localized production facilitates just-in-time manufacturing, which optimizes workflow to more quickly produce a more specialized product for less capital investment. 

It’s happening, but not how you think. In Footprint 2020: Expansion and Optimization Approaches for US Manufacturers, consulting giant Deloitte says “the next shift in manufacturing locations is imminent,” but adds “some 98% of companies surveyed plan to either expand existing sites, or open new facilities, in countries with existing operations. This trend is true for virtually all types of facilities, from production to assembly to R&D. China and the US are anticipated to receive the highest number of existing country expansions.”

One topic, three views. Which do you agree with? And why?

*For the uninitiated, the Forbes Council is basically a network of bloggers who pay Forbes to publish their work. So take that for what it’s worth.

Heavenly Circuits

Jerry Falwell Jr. is in the news again, for salacious reasons that have nothing to do with electronics (I hope).

It seems like he’s having a bad week, and I’m certainly not going to pile on.

But mention of his name reminds me of the time I spoke with the son of the famous evangelist, and it was in my professional capacity as an editor, no less.

As I recall, I answered the phone one day — I can’t remember which year it was, but it would have been sometime around 2004 — to find a very professional voice on the line.

“Mr. Buetow?”

Yes.

“Would you have time to speak with Mr. Jerry Falwell Jr.?”

Umm, sure.

When JFJ came on, he was very polite and to the point. A gentleman in our industry — a printed circuit designer — had developed a concept for putting identical components on opposite sides of a board and running vias through to shorten the length of the connections. The designer, with whom I had spoken from time to time over the years, had offered the concept to Liberty University, where Falwell was vice chancellor. Mr. Falwell Jr. wanted my thoughts on whether Liberty should invest the monies to patent the idea.

I don’t recall what I told him, but a check of the USPTO shows that Liberty did follow through. A colleague reminded me representatives from Liberty actually attended PCB West one year as well to promote the mirror pinout concept. Still, I doubt they made much money off the idea, which has been overcome by other advances in component packaging anyway.

Whatever my advice to Mr. Falwell Jr. was, I hope it didn’t put him in a bad position with his trustees. I’m fairly confident it has nothing to do with the predicament he finds himself in now.

And if he calls me again, I’ll still be happy to talk. Provided we stick to electronics.

Whither Hong Kong?

The dispute between China and the US over trade, IP protection, human rights, and basically everything else ratcheted up a notch today as President Donald Trump announced the start of the process to revoke Hong Kong’s favored trade status with the US.

“I am directing my administration to begin the process of eliminating policy exemptions that give Hong Kong different and special treatment,” Trump said in a statement.

“My announcement today will affect the full range of agreements that we have with Hong Kong, from our extradition treaty, to our export controls and technologies. We will take action to revoke Hong Kong’s preferential treatment as a separate customs and travel territory from the rest of China.”

Hong Kong is not a major landing spot for manufacturers anymore. There are roughly 30 EMS companies of any size with operations there, per the CIRCUITS ASSEMBLY Directory of EMS Companies. VTech and Wong’s are the only Top 50 EMS companies based there. There are no bare board fabrication operations of any major size.

According to one source of mine, some companies use Hong Kong as a legal way to finish assembly to bypass tariffs on Chinese made goods from the mainland. If so, the president’s action will render that moot.

My question is, what will this mean for the scores of electronics companies that have sourcing operations in Hong Kong? While most of their business is done across borders, Hong Kong offers a more Western feel (and rules) for ex-pats. With the Beijing taking an ever greater interest in the city-state, that is almost certain to change.

I could see companies moving their program management staff elsewhere, if for no other reason than Hong Kong is expensive — maybe the most expensive place in the world for ex-pats. But if so, where would they go? And what will happen to Hong Kong if other industries follow suit?

Zarrow and Hall’s “Board Talk” Becomes a Book

Folks,

There are a few good books that relate to electronics assembly. Ray Prasad’s Surface Mount Technology: Principles and Practice comes to mind. However, few (none?) teach the skills that need to be developed to become an electronics assembly process engineer, so Jim Hall and I collaborated on Handbook of Electronic Assembly and Guide to SMTA Certification a few years ago.

There was still a gap, however. No book existed that discussed troubleshooting everyday assembly defects and challenges. My good friends Phil Zarrow and Jim Hall have addressed this information in their Circuit Insight radio show Board Talk. All that was needed was a little encouragement to assemble it in book form. This task has now been accomplished!

Phil and Jim’s Troubleshooting Electronics Assembly is certainly one of the most useful books available for everyday SMT and though-hole assembly challenges.

Phil and Jim’s Book Can Help with Everyday Assembly Challenges

Check it out.

Cheers,

Dr. Ron

‘The Era of Offshoring US Jobs Is Over’ … or Is It?

That’s what the US Trade Representative says in an editorial in the New York Times today. And he gets the drivers right, mostly. But the results? “The United States lost five million manufacturing jobs. That, in turn, devastated towns and contributed to the breakdown of families, an opioid epidemic and despair.”

That’s just a crazy extrapolation. The US was at 3.1% unemployment prior to Covid-19.

Repeat after me: There. Were. More. Jobs. Than. Qualified. Workers.

For two decades, the no. 1 complaint I’ve heard from US business owners is the lack of manufacturing talent. Even in times of higher unemployment rates (the last two months notwithstanding), managers consistently noted the lack of basic communication and math skills among the workers available.

In his op-ed, USTR Robert Lighthizer adds, “If you want certainty, bring your plants back to America.”

It’s not that simple. You need the whole supply chain. And you need an end-market. The US, at 327 million people, isn’t big enough to sustain a company of any real size; those firms must be able to sell into other (larger) markets too.

And all those other big markets (China, Brazil, EU, etc.) have their own “make local” requirements and incentives.

I wish Lighthizer were right. But I’ll say it again: The US does not have enough worker talent to handle manufacturing at the cost necessary to satisfy the US market.

Covid-19 is Creating a Perfect Storm for Manufacturing

By Rafael Gomez, Director Product Strategy, Bright Machines

The pandemic’s economic impact started as a supply chain shutdown in Wuhan, China, but rapidly became a three-tier global disruption. As the virus spread, worldwide supply chain was interrupted, followed by an unprecedented shift in product demand and most recently by mandated factory shutdowns imposed on non-essential product manufacturing lines.

Let’s discuss the impact of these disruptions and explore how we can mitigate these forces that threaten to destabilize manufacturing.

Disruption #1 – Manufacturing and the supply chain

The first disruption to manufacturing and the associated supply chain was in China. This was due to the outbreak of novel coronavirus (Covid-19) forced workers in that county to stay home rather than return to work after the Chinese New Year holidays. The resulting impact was that a significant amount of the world’s manufacturing capacity was essentially shut down for an extended period, more than two weeks in most of China, and much longer in Wuhan.

This manufacturing and supply chain shutdown turned out to be just the start.  As the virus spread, manufacturing shutdowns rapidly spread throughout Europe and the US. We are now faced with the challenge to scale additional capacity or rapidly move production from one facility to another, neither of which are feasible in the manufacturing industry.

Disruption #2 –Demand volatility

Just as China’s factories started to come back online it became abundantly clear that the challenges were global and that certain products like PPE (Personal Protective Equipment) and medical devices were in unprecedented demand in terms of volumes and urgency. Meanwhile, workers, who are themselves consumers, were staying home and not shopping, sending economic shockwaves around the world, resulting in a dramatic downturn in market demand for non-essential or discretionary products. Add government and administrative intervention, including the loosening of FDA regulations and the use of the Defense Production Act in the USA, and it’s easy to see how the manufacturing industry was suddenly forced to deal with the unprecedented reactionary shift in market demand.

Disruption #3 – Workplace challenges

The third disruption came in the form of government directives to shelter in place and enforcement of workplace social distancing (including new OSHA guidelines).  Furthermore, non-essential factories have been shut down for an extended period. Once factories reopen, manufacturing plants will need to adhere to new and complex regulations. For example, when factories re-opened in China, they were mandated toto demonstrate ten-day supply of face masks for each worker. For example, a factory of 500 operators would need 10,000 masks to be authorized to continue operations. For many factories, an ongoing supply of PPEs in short supply and can be challenging and costly to obtain.

Once manufacturing companies receive authorization to restart operation, workplace social distancing on the factory floor will impact every discrete manufacturing function Traditionally, manual assembly lines are designed with minimum operator to operator spacing to facilitate the passing of product between stations and to minimize required floor space. With the new OSHA directives, these manual lines will need to be redesigned to increase operator spacing.  factories have met these challenges in creative style, like running extra shifts to redeploy staff and keep them distanced.

The data-haves and data-have-nots

Manufacturers that have embraced digital transformation, and the associated software-controlled automation, are best equipped to succeed in light of these disruptions. Real-time data drives visibility, which allows these “digital haves” to see the impacts of disruption sooner. Meanwhile, smart automation provides tools to adapt and adjust course quickly. Not only are these companies able to adapt production to meet increased demand or comply with new regulations, they are able to rise to the challenge of manufacturing the machines, devices, and consumables needed to help fight the virus, perhaps offsetting the loss of orders for ‘non-essential’ products.

The Future is agile and resilient

This perfect storm of disruption has exposed limitations of traditional manufacturing ecosystems and their associated supply chains. It has become clear that manufacturers need to move away from traditional analogue operational models, where production takes significant and costly time to set up on a line and requires constant tweaking or adjustment by experts with tribal knowledge of manufacturing processes.

To minimize the impact of economic disruption, manufacturers need to operate in a new paradigm.  This new version of manufacturing is fully data-enabled and software-driven to deliver an automated solution that provides the resilience to cope with disruption and the agility to react and adapt when that inevitable disruption occurs.

Considering previous viral outbreaks and natural disasters, Covid-19 isn’t the first global event to disrupt manufacturing and the supply chain, and it certainly won’t be the last. One key learning from this unprecedented event is that companies that have embraced digital transformation of manufacturing are the most robustly equipped to survive this economic disruption. These forward-thinking manufacturers will surely reap the prosperous benefits of their proactive digital transformation.

https://www.brightmachines.com/blog/

Make in India?

A colleague asks whether companies are looking at India as a country they can source electronics goods.

Good question. I would say that right now it’s not high on the list. It has a long way to go to develop the infrastructure and mass of supply chain companies dedicated to electronics (component manufacturers, laminate suppliers, chemistry suppliers, etc.). 

But … the bloom is way, way off the rose in China. China is less attractive from a labor rate perspective, and coupled with the tariffs, firms were already looking at alternatives even prior to Covid. See below for the year-over-year changes in electronics imports to the US from certain nations:

US electronics imports from selected nations, 2017-19

India’s electronics imports to the US grew 20%+ year-over-year in back-to-back years. Granted, it was starting from a low base: imports in 2016 (the base year) were just $754 million, and so even with the increase the total is just over $1.1 billion. Vietnam, another big gainer, is at now at $22.7 billion. China, even with the dip in 2019, was at $170 billion.

I do think US companies will to a greater degree be looking at nations outside China as potential manufacturing centers. India’s massive population continues to make it attractive of course. Now it needs to attract a few more assembly companies, which in turn will drive the suppliers to locate there.

Post-Covid, Will Connections Be Scarcer?

A friend writes to say he’s been about the effects of “social distancing” policies. Will they have a permanent effect on our lives, he wondered. And will they impact events such as trade shows?

It wasn’t the first time I have been asked that of late. The subject also came up on a couple of podcasts I’ve had the good fortune to do, one with Judy Warner of Altium and the other with Mike Konrad of Aqueous Technologies.

My short answer is, I think there will be an impact, but it will swing toward more contact, not less. Indeed, after being cooped up for so long, I think people will crave human connections. Moreover, I don’t think it will have an effect on trade shows. In fact, I think this will reveal lots of holes/flaws in inter-/intra-company digital communications, which gives us all something to work on for the next quarantine (heaven forbid). 

We aren’t the only ones contemplating what happens next. The Boston Globe this week published a piece in which several self-styled business futurists and science-fiction writers expect the world will look like next fall/winter.

I can’t say I’m impressed with most of their responses, which if anything feel exaggerated for effect. But see for yourself.